DYNAM JAPAN HOLDINGS' (HKG:6889) Dividend Will Be Reduced To ¥0.1423

DYNAM JAPAN HOLDINGS Co., Ltd. (HKG:6889) is reducing its dividend from last year's comparable payment to ¥0.1423 on the 23rd of June. However, the dividend yield of 5.5% is still a decent boost to shareholder returns.

View our latest analysis for DYNAM JAPAN HOLDINGS

DYNAM JAPAN HOLDINGS' Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, DYNAM JAPAN HOLDINGS' dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Looking forward, EPS could fall by 29.2% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, the payout ratio in 12 months could be 15%, which is more comfortable than the current payout ratio.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥11.50 in 2013, and the most recent fiscal year payment was ¥5.00. This works out to be a decline of approximately 8.0% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Earnings per share has been sinking by 29% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

DYNAM JAPAN HOLDINGS' Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, DYNAM JAPAN HOLDINGS has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.